In The News Today

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126 Dollar Days to go

Jim Sinclair’s Commentary

The truth in China runs totally juxtapose to the truth according to US media, financial TV and the usual chorus of talking heads, China bashers and so called experts.

The following is a comment made by the Deputy Foreign minister to a group of visiting business people. There was no maybe or conversation on the topic. It was emphatic.

“The financial crisis has fully exposed some shortcomings in the international currency system.

China is not seeking discussions but wants a diversified reserve currency.”

Last week the Bank of China renewed its call for the creation of a super sovereign reserve currency (defined as a basket of currencies) to reduce the dollar’s global domination.

The US media pumped out more MOPE and Spin that China was only talking, having no real intention of demanding any such thing.

The problem is that the upcoming G8 plus 5 summit is going to be all about reduction of dependence on the US dollar. All other subjects of discussion are just diversions.

A change is coming and the timeframe can be measured in months, not a decade.

Jim Sinclair’s Commentary

California IOUs have some value, but for 7 days only.

You think California will be able to pay off these IOUs in 7 days, or even 7 months for that matter?

What do you think this means to business in California? What do you think this means to the worthless guarantees on California municipals? What is next? Los Angeles County 20% five year municipal bonds? Maybe they could get short term loans from the Bloods or the Crips?

Bank of America sets cutoff for redeeming California IOUs
The bank warns it will halt the transactions after July 10. Some other big financial institutions follow suit.
By Tom Petruno
July 3, 2009

Bank of America Corp. set the tone for the banking industry’s response to California’s decision to issue IOUs.

That message, essentially, is this: "We’ll help you for a week. If you can’t get your act together and nail down a budget by then, you’re on your own."

Bank of America announced late Wednesday that it would redeem in full the state’s IOUs (formally, "registered warrants") from current BofA customers who want to cash them in. But the bank set a cutoff date of July 10.

On Thursday, other big banks including Chase, Wells Fargo & Co. and Union Bank followed BofA’s lead, saying they’ll cash the IOUs from customers only through July 10.

Some banks, including City National, didn’t set a cutoff date, but they didn’t preclude doing so at some point. Many credit unions also have agreed to accept the IOUs from customers without setting a time limit, the California Credit Union League said.

The big banks’ hardball strategy will create hardships for their customers if no budget deal is struck soon and the state continues to issue IOUs instead of checks. The state set a redemption date of Oct. 2 for the IOUs, although it said it might redeem them before then if it has the cash. Other lenders may step up to buy the IOUs in the interim, but probably at a discount to face value, unlike the big banks’ redemption programs.


Jim Sinclair’s Commentary

Would it not be reasonable for California citizens to pay their state taxes with IOUs carrying 3.75% interest?

You think things are just dandy with Green Shots popping up everywhere?

What exactly are the suppliers being paid $3.4 billion in IOUs going to pay their workers with?

This is a downward spiral nearing the end point of the Formula wherein non-US consumers of US debt instruments get tired of supporting a dark comedy of errors.

IOUs from California are on their way
By Mike Zapler
Posted: 07/02/2009 05:43:55 PM PDT

SACRAMENTO — With its bank balance careening toward zero, California began sending tens of thousands of IOUs to its creditors on Thursday, the latest black eye for the state and its broken budget system.

Nearly 30,000 IOUs began rolling off state printing presses hours after officials agreed to pay recipients 3.75 percent interest on the notes. California will continue to pay about $3.4 billion of its obligations this month with scrip instead of cash if the governor and legislators don’t soon find a way to balance the state’s books.

It will be the first time since 1992 that vendors, taxpayers and social service providers will receive IOUs, formally known as registered warrants, from the state. The IOUs will mature on Oct. 2 unless banks agree to honor them sooner.

So far, Bank of America, Wells Fargo and Chase have said they will cash IOUs from customers through July 10, state Treasurer Bill Lockyer’s office reported. But as partisan sniping continued in the Capitol on Thursday, it remains far from certain that Gov. Arnold Schwarzenegger and legislators will hatch an agreement by then.

Schwarzenegger was asked at a news conference what he would tell people who receive the IOUs in lieu of actual money.


Jim Sinclair’s Commentary

We should have known that when the FDIC started releasing stats on bank failures Wednesday, this week would be another record. 7 busted banks!

How is that for a Green Shot? You think the Bank of China can’t count?


Failed Bank List

The FDIC is often appointed as receiver for failed banks. This page contains useful information for the customers and vendors of these banks. This includes information on the acquiring bank (if applicable), how your accounts and loans are affected, and how vendors can file claims against the receivership. Failed Financial Institution Contact Searchdisplays point of contact information related to failed banks.

This list includes banks which have failed since October 1, 2000.

Click arrows next to headers to sort in Ascending or Descending order.

Bank Name




Closing Date

Updated Date

Founders Bank




July 2, 2009

July 2, 2009

Millennium State Bank of Texas




July 2, 2009

July 2, 2009

First National Bank of Danville




July 2, 2009

July 2, 2009

Elizabeth State Bank




July 2, 2009

July 2, 2009

Rock River Bank




July 2, 2009

July 2, 2009

First State Bank of Winchester




July 2, 2009

July 2, 2009

John Warner Bank




July 2, 2009

July 2, 2009

Mirae Bank

Los Angeles



June 26, 2009

July 2, 2009

MetroPacific Bank




June 26, 2009

July 2, 2009

Horizon Bank

Pine City



June 26, 2009

July 2, 2009

Neighborhood Community Bank




June 26, 2009

July 2, 2009

Community Bank of West Georgia

Villa Rica



June 26, 2009

June 30, 2009

First National Bank of Anthony




June 19, 2009

June 23, 2009

Cooperative Bank




June 19, 2009

June 23, 2009

Southern Community Bank




June 19, 2009

June 23, 2009

Bank of Lincolnwood




June 5, 2009

June 12, 2009

Citizens National Bank




May 22, 2009

June 1, 2009

Strategic Capital Bank




May 22, 2009

June 23, 2009

BankUnited, FSB

Coral Gables



May 21, 2009

June 8, 2009

Westsound Bank




May 8, 2009

May 12, 2009


Jim Sinclair’s Commentary

Here is a suggestion: Shut it down, burn the paper, imprison the manufacturers and distributors.

Give all their wealth to Mother’s T’s order. Prevent them from breeding.

EU body to publish OTC derivatives plan on Friday
07.02.09, 02:28 PM EDT

LONDON, July 2 (Reuters) – The European Commission will publish on Friday its long-awaited policy proposals on how to make the EU’s derivatives market safer, with a focus on centrally clearing trades, one of its senior officials said.

‘We will be publishing our paper tomorrow on the OTC derivatives industry,’ David Wright, deputy head of the Commission’s internal market unit, told a conference.

Wright said the focus would be on central clearing of OTC derivatives trades, confirming a Reuters report on Wednesday.

The report will launch a public consultation before final proposals are drawn up later in the year as part of global efforts to restore confidence in markets shaken by the worst crisis since the 1930s.

Wright also defended the Commission’s draft rules to regulate hedge funds which have been criticised by the industry and Britain for being too draconian and impinging on third country operators.


Jim Sinclair’s Commentary

You know for the equity gang, if you missed this rally, you have missed it, period. This may be all she sung.

Link to audio …

Is Wall Street’s Day of Reckoning Still to Come?
July 02, 2009

“Liar’s Poker” author Michael Lewis hasn’t been a popular guy on Wall Street since he wrote the book 25 years ago. Since then, he has written about finance many times and he is working on a new book about the current financial crisis. Although the banks have been scared and many have been shaken to their foundations, Lewis contends that there may be more upheavals to come. He is also shocked that the Treasury, the SEC and other agencies haven’t really begun to investigate what happened in the subprime mess. He says that when he has interviewed numerous executives from financial institutions, such as AIG’s Financial Products division, they tell him that no one from a regulator has come to try to find out exactly what happened. That fact alone, is simply astonishing.

In interviewing various people at places like AIG, "nobody from the Treausury has shown up" to ask around to find out what happened and what went on. "We don’t know the full extent of the losses in side the institutions." "This crisis is far from over."


Jim Sinclair’s Commentary

Wake up you slumbering Western sheeple! China is not just talking as your media would have you believe. As head of the BRICs they are ACTING!

Relaxing the Renminbi trade rule is a result of the hedge fund frantic shoving of the dollar up and down without season or reason. This removes overt foreign exchange impacts on earnings from cross border trade transactions.

It acts to reduce dollar use and therefore dollar demand as it works its way up the line of transactions.

Renminbi trade rule comes into effect
By Zhang Ran (China Daily)
Updated: 2009-07-03 08:06

China’s central bank yesterday released a rule permitting companies in select cities to settle cross-border trades using the yuan, as part of efforts to reduce reliance on the US dollar for international trade.

Banks will be able to offer yuan settlement services from now on, PBOC said in a statement on its website. It said tax authorities were working on the specific regulations for rebates.

The move, it claimed in the statement, would likely reduce companies’ exposure to foreign exchange risks, increase liquidity in foreign trade and cut transaction costs.

"Companies in China and neighboring countries are facing relatively huge risks of exchange-rate fluctuations because of big swings in the US dollar, the euro and other major settlement currencies in the wake of the global financial crisis," the central bank said.

The government in April said it would allow Shanghai and four cities in the southern Guangdong province – Shenzhen, Guangzhou, Zhuhai and Dongguan – to settle international trade in the yuan on a pilot basis. Companies in these cities, and elsewhere, currently have to convert yuan into dollars or other currencies to settle their export-import bills.


Jim Sinclair’s Commentary

Here is the most recent advertisement for stocking up the political retirement fund.

If you think Swat residents will see five cents on the dollar of this you are nuts.

Pakistan desperately short of money to resettle Swat residents

PESHAWAR, Pakistan — Major Western countries, after applauding Pakistan’s military crackdown on Islamic extremists in the Swat valley in the country’s northwest, haven’t pledged the money needed to resettle the population now that the fighting is mostly over, and humanitarian organizations fear that 2 million people will be sent back home before it’s safe to go.

Unless the United States and other allies provide the required money to reconstruct Swat, Pakistan risks losing the "hearts and minds" of those who had to flee the operation that fought the Islamic extremists who’d overrun the region. Islamabad doesn’t have the money, Pakistani officials said.

The rehabilitation cost is estimated at $2.5 billion, according to Lt. Gen. Nadeem Ahmed, the head of the military’s special unit set up to look after the internally displaced.

The national government is expected to announce shortly that the Swat refugees will begin returning later this month. So far, however, the government in Islamabad has promised only $300 million to the North West Frontier Province, mostly to beef up police in Swat.


Jim Sinclair’s Commentary

In this article some noted talking head says that Gold is taking its cue from the US dollar. I am sure he does not know the implications of his statement.

Crude oil, nickel, the long bond market and most everything else does as well. Therefore the market is telling you that the dollar will be the currency event that triggers hyperinflation during dire US business conditions.

Stuff this argument of inflation and deflation then make your opinion on the value of the currency by the name of gold.

Wake up and listen to the market explaining to you what lies in the future. The future is within the next 126 days.

DJ PRECIOUS METALS: Dollar, Pre-Holiday Squaring Hurt NY Gold

Gains posted by the U.S. dollar combined with pre-holiday liquidation to send gold and other precious metals lower Thursday.

August gold fell $10.30 to $931 an ounce on the Comex division of the New York Mercantile Exchange. September silver lost 35.2 cents to $13.408.

"It’s taking its cue from the buck," said Ralph Preston, senior market analyst with Heritage West Financial.


Jim Sinclair’s Commentary

OK, that is two in one day so let’s go for 3 more.

Do you really believe that these banks all just happened to fail this week? MOPE organizes the number of events to make public and when.

This is a practice to habitualize the public to bank failures, therein not increasing the fear of deposits now insured up to $250,000 paper dollars.

Guarantees from the Federal Government are a form of IOU.

Millennium State Bank of Texas fails
Dallas Business Journal – by Chad Eric Watt Staff Writer
Thursday, July 2, 2009, 5:21pm CDT

The Texas Department of Banking on Thursday closed Dallas-based Millennium State Bank of Texas, the first bank failure in Texas this year and the first in the Dallas area in more than a decade.

The six-year-old bank had one office in Dallas on Webb Chapel Road near Interstate 635.

Irving-based State Bank of Texas has acquired essentially all the assets of Millennium, according to the Federal Deposit Insurance Corp.

Seven groups put in bids for Millennium, according to the FDIC.

All depositors of Millennium State Bank will have access to their funds over the July Fourth weekend, according to the FDIC. On Monday July 6, they will automatically become depositors of State Bank of Texas.


Jim Sinclair’s Commentary

Come on we had 4 in 1 day last week. Let’s go for 5 in 2 days this week.

Harvard State Bank assumes Rock River Bank deposits
FDIC: Your deposits are safe
By Vinde Wells – Editor

A Federal Deposit Insurance Corporation (FDIC) official reassured Rock River Bank customers that their money is safe despite the failure of the bank Thursday.

"There is no need for panic. No depositor lost any money," said David T. Lok, senior ombudsman specialist from the FDIC Office of the Ombudsman. "Harvard State Bank assumed all deposits of the Rock River Bank."

Lok answered questions from reporters and customers outside the Oregon bank’s front door Thursday evening while a large group of bank examiners worked inside with local bank employees.

"It is business as usual for our customers," Lok said. "They should continue banking as usual. They can use the ATM, write a check, or use their debit cards."

He said the Rock River Bank branches will be closed on Friday and Saturday for the Fourth of July holiday, but will reopen Monday as Harvard State Bank.


Jim Sinclair’s Commentary

Thanks to the Green Hornet, here is an article that underscore a lesson in arbitrage that I have been labouring to impart to you. It is a key element in today’s bad dream. It is a "New Normal" that when any bankruptcy occurs in the chain, called an OTC derivative, the entire NOMINAL VALUE of that derivative becomes REAL VALUE in liquidation.

This is the legacy of letting Lehman go purposely.

When derivatives go bad: Matthew Goldstein
Reuters, Thursday July 2 2009
By Matthew Goldstein

NEW YORK, July 2 (Reuters) – THUD! That’s the sound a busted derivative trade makes when it lands at the courthouse steps.

Drake Capital Management, once a highflying hedge fund manager that is now winding down its operations, claims it’s still owed some $102 million on a derivatives trade that went kablooie when Lehman Brothers filed for bankruptcy. Like most of Lehman’s thousands of creditors, the New York hedge fund hasn’t been paid a penny.

So Drake has filed a weighty 543-page document in bankruptcy court to press its point. A close look at the Drake filing shows why the Obama administration’s proposal to regulate and rein in these often exotic financial instruments may be easier said then done.

Only five pages of the filing are devoted to the so-called proof of claim, where Drake co-founder Steven Luttrell explains why the hedge fund is still owed money. Most of the remaining 538 pages are what constitutes the actual derivative — the various contractual agreements spelling out the terms of the trades between Drake and Lehman. The agreements date back to August 2004.

To be precise, there wasn’t just a single derivatives trade between Drake and Lehman. In fact, there were many different trades involving a whole assortment of underlying assets including foreign currencies, municipal bonds, corporate bonds and sovereign debt. Drake kept expanding its trading relationship with Lehman by adding on one derivative transaction after another.



EU urges Iran to release British Embassy staff, considers pulling ambassadors in protest
July 2nd, 2009

STOCKHOLM — The European Union demanded on Thursday that Iran release all detained British Embassy staff amid disagreement over how many there were and discussion of a British proposal for the bloc to jointly withdraw all 27 of its ambassadors from the country.

Recalling the diplomats would be an extraordinary move and a powerful signal of EU unity in the wake of Tehran’s postelection crackdown.

But punishing the regime too harshly also risks spoiling chances of making headway on the critical issue of Iran’s disputed nuclear program.

Swedish Foreign Minister Carl Bildt suggested Iran could avoid a widening diplomatic rift by releasing local British Embassy staff who were detained for an alleged role in postelection protests.

Nine local staff were initially detained over the weekend. Iranian state TV on Wednesday said Tehran released all but one of the employees, but Bildt said “more than one” remained in custody.